"Sept 16 (Reuters) - Irwin Financial Corp (IFC.N) said it had 'no realistic prospect' of boosting its capital to levels demanded by a U.S. regulatory cease and desist order.

The news nearly wiped out nearly half of Irwin's market value in early trade, but the shares later recovered to 53 cents, down 40 percent from Tuesday's close, in high volume.

The company along with its banking unit Irwin Union Bank & Trust Co received a cease and desist order from regulators, and the bank is currently classified as 'undercapitalized' under regulatory capital standards.

The cease and desist order, from the Federal Reserve and the Indiana Department of Financial Institutions, requires the bank holding company to achieve a certain capital level and reduce reliance on certain types of deposits by Sept. 30."